Minor International

Minor International Plc (MINT)

- 1Q14 normalized profit to grow from every business
We project 1Q14 net profit at B1,323m, falling 15%qoq and 6%yoy, as
B295.4m extraordinary income from capital adjustment would not be
booked in 1Q14. Excluding extraordinary items, 1Q14 normalized profit
is expected to grow by 18.8%yoy.
- For hotel business (37% of total income), the political unrest has been
affecting MINT's hotels in Bangkok, possibly lowering their 1Q14
occupancy rate to 50% and pressing their RevPar by over 30%yoy.
However, hotels in Bangkok make up only 7% of MINT’s total income. At
the same time, hotels in other provinces and abroad have generated
strong income. Thus, overall RevPar is expected to rise by 2.5%yoy.
Income from property business (6% of total income) is expected to drop
by 4.7%yoy to B510m, as no unit of St. Regis condominium has been
transferred. Income from food business (41% total income) is expected
to grow by 9%yoy; though same store sales would drop by 1.8%qoq as
a result of the economic crunch, 24 new branches have been opened
since 4Q13 (162 more since 1Q13), totaling 1,568 branches. Overall,
MINT’s normalized income is expected to increase by 4.5%yoy to
B9,324m. We project EBITDA margin to rise from 24.3% in 1Q13 to
25% in 1Q14.

- Hotel and food sectors rebounding after revoking emergency decree
Hotel business in Bangkok has been improving after the emergency
decree is revoked and PDRC stops rallying around important areas in
Bangkok. If the political situation does not escalate, it is likely to return
to normal in next couple month. Occupancy rate of hotels in Bangkok
has dropped by 20% in April (versus 30% cut in 1Q14). At the same
time, hotels in other provinces have continued generating strong profit.
Overall, despite 2%yoy fall in occupancy rate, April RevPar is projected
to rise by 7%yoy thanks to 10%yoy hike in room rate. Food business is
also likely to improve. April (1-20 April) same store sales have
rebounded and grown. Including sales from new branches, income from
food business is expected to rise by 5-10%yoy. We maintain our FY2014
earnings forecast, projecting MINT's net profit to grow by 7%yoy to
B4.4bn.
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Low season. Limited upside. Hold
We derive FY2014 fair value (DCF, 9.4% WACC) at B26.00, implying
only 4% upside. Also, this is a low season for hotel stocks. We
recommend holding.